Mis-Characterizing Household Employees for Taxes

Nannies who provide in-home care are almost always employees of the families who employ them, yet many families characterize their domestic employees as independent contractors incorrectly, either unknowingly or willfully, in order to avoid social security taxes or overtime pay rules of the federal Fair Labor Standards Act (FLSA). Over the last few years, the Wage and Hour Division of the US Department of Labor, the Division charged with enforcement of the FLSA, has increased its investigative focus on independent contractor mis-classification and nontraditional workplace structures, according to David Weil, administrator of the Wage and Hour Division since 2014.

Consult with your Tax Professional

Household employers who are treating their nannies or eldercare providers as independent contractors, instead of as employees, are advised to consult with an accountant or other tax professional to ensure they are properly classifying their workers and not running afoul of federal or state employment laws.